BE 5-2 Contribution Margin

Lanning company sells 170,000 units at $55 per unit, Variable cost are $30 per unit, and fixed costs are $1,025,000.

Decide: (a)The contribution margin ratio.

(b)The unit contribution margin.

(c)Income from operations.

BE 5-3 Break-even point

Bigelow Inc. sells a product for $1,300 per unit. The variable cost is $825 per unit, while fixed costs are $3,130,000.

Decide: (a)The break-even point in sales units.

(b)The break-even point in sales units if the selling price were increases to $1,325 per unit.

BE 5-4 Target profit

Ramirez Co. sells a product for $90 per unit. The variable cost is $70 per unit, and fixed are $4,950,000.

Decide: (a)The break-even point in sales units.

(b)The sales units required to achieve a target profit of $550,000

PR 5-1B Classify costs.

Cromwell Furniture Co. manufactures sofas for distribution to several mayor retail chains. The followings costs are incurred in the production and sale of sofas:

a. Fabric for sofa coverings

b. Wood for framing the sofas

c. Legal fees paid to attorneys in defense of the company in patent infringement, $25,000 plus $160 per hour

d. Salary of production supervisor

e. Cartons used to ship sofas

f. Rent on experimental equipment, $50 for every sofa produced

g. Straight line depreciation on factory equipment

h. Rental cost of warehouse, $30,000 per month

i. Taxes on property, plant and equipment

j. Insurance premiums on property, plant and equipment, $25,000 per year plus $25 per $25,300 of insured value over $16,000,000

k. Springs for seat cushions

l. Consulting fee of $120,000 paid to efficiency specialist

m. Electricity cost of $0.13 per kilowatt-hour

n. Salesperson's salary, $80,000 plus 4% of the selling price for each sofa sold.

o. Foam rubber for cushion fillings

p. Janitorial supplies, $2,500 per month

q. Employer's FICA taxes on controller's salary of $180,000

r. Salary of designers

s. Wages of sewing machine operators

t. Sewing supplies

Instructions: Classify the preceding costs either fixed, variable, or mixed.

PR 5-3B Break-even sales and cost-volume-profit chart

For the coming year, Culpeper Products Inc. anticipates a unit selling price of $160, a unit variable cost of $115, and fixed costs of $825,000. Instructions:

1. Compute the anticipated break-even sales (units)

2. Compute the sales (units) required to realize income from operations of $ 325,000.

3. Build a cost-volume-profit chart, assuming maximum sales of 45,000 units within thelevant range.

4. determine the probable income (loss) from operations if sales total 35,000 units